Understanding the Seven Habits of Wealth

This is a guest post from Dough Roller, a Washington D.C. blogger who writes about building wealth, one dollar at a time.

We are what we repeatedly do. Excellence then, is not an act, but a habit. — Aristotle

We tend to define our lives by the big events: graduation, marriage, children, a big promotion, retirement. What often gets neglected are the little things we do every day, the little things that make the big events possible. As Aristotle said, it’s what we “repeatedly do” that produces excellence. When it comes to money and wealth, what do you repeatedly do?

Financial security cannot be reduced to a simple formula. Like excellence, it is the result of your daily habits. An individual with high income who has poor daily habits will fail to find financial security. But a person with relatively low income can achieve financial freedom through the power of good habits. So what are the habits of wealth?

Hard WorkBy working hard, old man, I hope to make something good one day. I haven’t yet, but I am pursuing it and fighting for it. — Vincent van Gogh

Hard work is the habit first among equals. Achieving financial security is often the result of consistent diligence. We’ve all heard of individuals who found wealth through inheritance or the lottery, and these stories are the most memorable. What we rarely hear about, however, is the school teacher who works hard for 40 years and, along with some of the other habits below, manages to save $1 million or more on a salary that never exceeds $50,000 per year. Hard work enables us to appreciate all the more the financial security that it produces.

Modest LivingA just and reasonable modesty does not only recommend eloquence, but sets off every great talent which a man can be possessed of. — Joseph Addison

This habit is the great equalizer. Modest living can produce great wealth on a modest income. In contrast, frivolous uncontrolled spending can result in financial turmoil for the highest paid among us. My grandmother lived modestly. A nurse by education and training, her income was modest by the prevailing standards. Yet she managed to pay cash for her home and save enough for a generous retirement. More importantly, modest living produced a contentment in her that money just cannot buy.

PatienceBut investors don’t necessarily have the patience to wait for the great company with the great underlying economics at the right price. When Warren bought Dairy Queen, I joked, “He probably wanted to buy it when he was eight years old, but it wasn’t the right price.” So he waited 50 years or so. — Mary Buffett

Shortcuts born out of impatience lengthen the trip. With wealth, impatience often leads to decisions with dire consequences. Patience, however, should not be equated with inaction or passivity. Rather, practicing the habit of patience produces thoughtful, long-term decisions that can produce wealth while minimizing risk. Warren Buffett epitomizes the patient investor. His investing success is often the result of patiently waiting for the right time to buy a stock or a company.

PerseveranceLife is difficult. This is the great truth, one of the greatest truths — it is a great truth because once we see this truth, we transcend it. — M. Scott Peck

If it were easy, everybody would do it. The fact is, obtaining financial security requires working through challenges. These range from the small, daily choices we make, which over time have a monumental impact on our finances, to the big money events in our lives that are the most memorable. Perseverance keeps us focused on our goals, and enables us to confront all challenges, big and small.

BalanceThe word â€˜happiness’ would lose its meaning if it were not balanced by sadness. — Carl Gustav Jung

We are constantly bombarded with imbalance in the financial press. Either real estate beats stocks or stocks beat real estate, but rarely do we hear of a healthy balance of both. Balance in all aspects of our lives produces completeness in a way that obsession never will. But balance does not mean a lack of passion. To the contrary, balance in our relationships, work, finances and other areas of our lives enables us to pursue life with passion while remaining firmly rooted. In our finances, balance shows us the importance of living for today and for the tomorrows that come our way.

Self-AwarenessI think self-awareness is probably the most important thing towards being a champion. — Billie Jean King

“I’m trying to find myself,” was a common refrain among teenagers when I was growing up. It was the best excuse we could muster for avoiding the realties of adulthood. But a healthy dose of self-awareness brings into focus the motivations behind the daily decisions we make. Self-awareness allows us to understanding what motivates us to spend money, what investments are best for us given our tolerance for risk, and ultimately what will produce contentment in our lives. Practicing the daily habit of introspection leads to self-awareness.

LearningI went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I have not lived. — Henry David Thoreau

It’s what we don’t know that we don’t know that is most dangerous. The habit of life-long learning enables us to improve our careers, investments, and spending, as well as other areas of our lives. The older I get, the more I realize that learning is a process, not an event. As soon as we think we’ve got it all figured out, something comes along to remind us just how fragile our understanding can be. Make learning a daily goal, and your finances will thank you for it.

What do these habits teach us? In the words of Aristotle, they teach us that who we are and what we have is a result of what we repeatedly do. Wealth then, is not the result of an act, but the result of our habits.

I don’t want to live modestly. I don’t want to defer all my enjoyment of life until I’m 65 and too old to enjoy it. I don’t want to spend two weeks a year on vacation and the rest of the time at work. I don’t want to spend my kids’ childhood at the office.

I dislike this philosophy of “work hard all your life so you can retire and live a modest but comfortable life”. That’s an awful way to lead a life.

@ Gal: How do you want to live your life and by what philosophy do you want to live your life by?

For me personally, I don’t want much more than a family and a home of my own. I’m striving for a job I can do at home anytime because I hate being confined to the ‘9 to 5’ world. I want to spend time with my kids and have some fun while it’s there to be had, not be stuck in an office all day. And I’m not much interested in becoming rich, just in having enough for my future family to live comfortably and without want for anything.

I like the philosophy of working hard and enjoying the fruits of my labor; I just want that small caveat that allows me to do so on my time, not the time of the 9 to 5.

Gal…there’s a balance between enjoying what life has to offer and running yourself ragged trying to pay for things that you can’t really afford and don’t bring you true and lasting satisfaction. Joe Dominguez (Your Money of Your Life) wrote a bit about finding that balance through something he called the “contentment curve.” It’s different for everyone.

I think many people underestimate what it will take to retire in the next twenty years and are woefully unprepared for that moment because they overestimate what kind of lifestyle their salaries can actually support over the long haul. And, BTW, 65 is hardly too old to enjoy life. If your username is any indication, I’m sure you’ll be tearing up the road well into your twilight years.

Naturally, the strongest early reaction was against the idea of “modest living”. “Modest” as used here means “limited in size, amount, or scope” “(Merriam Webster). Hello — anyone here have unlimited means or scope in their lives? Are we just in denial and trying to pretend that we can’t have everything we want when we want it?

My favorite results of embracing a modest lifestyle are:
— knowing we can weather almost any type of financial setback without losing everything.
— being out of the competition to keep up with everyone else’s expectations or definitions of success. This is where self-awareness comes in for us: our goals and sources of joy drive our lives, not yours or theirs.

I am struggling with patience, though! Once I decide to do something, I want to go do it NOW! (I think that’s the control freak coming out.) Something that isn’t quite right still isn’t right just because we don’t want to wait.

A great article. It’s always nice to see things broken down into steps or habits. Too often we forget that there is a lot of inner work involved with getting rich, and focus only on the money part of it.

I empathize. Part of it, for me, is choosing my battles. I got the education I needed so that I can do work I find interesting. I found a job where I can work a bit less then 8 hours a day and get 4 weeks vacation a year. I’m putting up with a fair amount of muscle soreness right now because I’ve increased my activity level.

OTOH, the last time I job-searched, I turned down jobs that paid better and required 50-60 hours a week. If money was most important to me, I’d have taken it. The tradeoffs involved in working that hard don’t appeal to me. I also can live well within my means, so I have no practical need for the extra money right now.

Oh, and: I have a fear of falling. There’s no way I’m going to balance on a board placed between a ladder and the stairs to wash the second-story windows in my entryway. I could work hard to overcome this fear … but I have many, many things higher on the priority list right now :)

I really enjoy your blog. I’ve been trying to improve my financial situation after destroying it with bad habits and irresponsiblity in college. The last few years have been a struggle to actually implement all that I’ve been learning about healthy personal finance. This month, after reading a past blog about the debt snowball payment plan I set some goals and am sticking with them. I finally feel like I’m making some actual headway in my thought and spending patterns. Keep up the inspiring writing! You have truly helped me help myself.

Think big, do big things that are different, contribute to the world and make a great deal of money -then live large.

That does not mean in debt or beyond your means as is so prevalent today.

My father worked very very hard. He amassed a nice fortune and really started to enjoy the wealth he amassed when be was about 60 years of age. He died suddenly at 63 and left a lot of chips on the table.

PS If your wondering did he leave me the money the answer is no. His will called for the establishment of a charitable trust. What I did get was a priceless education that has allowed me to be successful on my own.

I have enjoyed reading these comments about my article. Two things stand out to me. First, the importance of balance. I agree we shouldn’t sacrifice everything today for a richer tomorrow, but we also shouldn’t spend everything today without regard for tomorrow. I tried to capture that idea as follows: “In our finances, balance shows us the importance of living for today and for the tomorrows that come our way.”

Second, I found the response to “modest living” very interesting. I spent a lot of time deciding on the word “modest” for this article. I still stand by it, although I recognize that what’s modest living for one might be frivolous living for another. I still believe that modest living produces the most contentment in life, although I can’t claim to have always practiced this idea.

Andrew,
My philosophy for life is to make smart decisions so you can enjoy the present while still thinking about the future. I refuse to just settle for “comfortable”. I want “fun” and “enjoyable” and “memorable”.

Redhead68
Of course. I do understand that balance. I don’t spend unnecessarily on fancy cars and large houses. However, I also don’t intend to work every day until I’m 65 just so I can retire. Retirement seems to be the wrong goal. Living life to the fullest seems to be a better one. And yes, I am also planning for the future, I’m just enjoying the present at the same time. My posting title by the way refers to my fitness blog’s name, not age :)

JenK
Sure, that’s exactly what I mean! I made good choices about my education and career. So now, I can afford to pick and choose my job. I can find one based on what I like, not based on pay. I can take months off of work and know that I’ll still be fine. Instead of counting down the days, weeks, months and years to retirement, I can save for the future while still having a great time in the present.

Sorry folks, I didn’t mean to get anyone all riled up. Your life is yours to live and you all should do whatever makes you happy. I just get annoyed sometimes with this mantra of “work hard for 45 years so you can have a comfortable retirement.” I couldn’t life with that as my only future prospect. But hey, that’s just me.

Excellent material J.D. Made me a subscriber. Seldom is wealth considered in terms of personal character. You’ve done a good job here. I’ll add one thought from Goethe: “What you get by achieving your goals is not as important as what you become by achieving your goals.”

@ Gal: I can understand the philosophy you live by and actually I quite like it. Good luck to you in achieving your goals!

Just to be clear though; I’m not settling for “comfortable”, that’s exactly I want. I’ve no doubt that always being able to live comfortably is as important to me as having a life full of fun, enjoyable memories is to you.

[…] prefer to live.Â So I read on these topics often.Â A recent article that I especially enjoyed is Understanding the Seven Habits of Wealth. The article takes some excellent life aphorisms and applies them to the world of personal […]

Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Blueprint for Financial Prosperity reminds you to check your asset allocation. No Credit Needed got his van. Get Rich Slowly lists the seven habits of wealth. Consumerism Comm…

[…] something for nothing, or a sure fire formula without have to risk anything. Guest blogger Dough at Get Rich Slowly puts it this way: “Hard work is the habit first among equals. Achieving financial security is […]

[…] Three Legislative Proposals That Could Have Major Consequences for Your Finances Thursday, 18th December 2008 (by J.D.) This article is about Economics, News, Odds and Ends If you’re new here, you may want to learn what this site is about. I encourage you to subscribe to my RSS feed. Thanks for visiting!J.D. is on vacation. This guest post comes from DR of The Dough Roller, a money management blog. Previously at GRS, he shared the seven habits of wealth. […]

Your email address will not be published. Required fields are marked *

Comment

Name *

Email *

Website

My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

If you like this website, you should check out the year-long Get Rich Slowly course. It contains everything I've learned about saving and investing during 12 years of writing about money. Buy it here.

General Disclaimer: Get Rich Slowly is an independent website managed by J.D. Roth, who is not a trained financial expert. His knowledge comes from the school of hard knocks. He does his best to provide accurate, useful info, but makes no guarantee that all readers will achieve the same level of success. If you have questions, consult a trained professional.

Advertising Disclosure: Some offers on this page may promote affiliates, which means GRS earns a commission if you purchase products or services through the links provided. All opinions expressed here are the author's and not of any other entity. The content at Get Rich Slowly has not been reviewed, approved, or endorsed by any entity mentioned at the site. For additional information, please review our full advertising disclosure.